Midlands private equity deals saw a ten-fold increase in values in 2010 – but experts have cautioned that the apparent surge doesn’t reflect the true market.
The region saw 20 private equity-backed buyouts in 2010 worth £1.7 billion, compared to 16 in the previous year valued at just £140 million, according to newly-published figures.
Those numbers are still well down from the peak of the market in 2007, which saw 52 deals worth £3.1 billion, according to research from The Centre for Management Buy-out Research (CMBOR), sponsored by Ernst & Young and Barclays Private Equity.
But despite the seeming resurgence of deal values in 2010, Phil Griesbach, a director in the Birmingham office of Barclays Private Equity, sounded a note of caution.
He said: “I would say that the local market has been relatively quiet compared to the country as a whole.
“Whilst the quantum of £1.7 billion has gone up from hundreds of millions this time last year, that’s probably skewed by one or two large transactions which would have impacted those figures quite considerably.
“The transactions generated in the Midlands were still relatively quiet compared with what’s happening in the national market, which is a bit more buoyant. A better reflection of general activity in our market is the number of transactions rather than the value.”
On a national level, there were 164 UK private equity backed buy-outs in 2010 with an overall value of £18.2 billion, compared to 22 in 2009 with a value of £4.7 billion.
Manufacturing was the largest sector by value in 2010 with a combined value of £5 billion, a figure which included the £2.9 billion public to private deal of engineering firm Tomkins. Business services was the most active sector in 2010 by volume, with 37 buyouts compared to 22 deals in 2009.
Mark Stanway, transactions director at Ernst & Young in Birmingham said: “Confidence is gradually returning to the UK buyout market.
“Very few large deals grab the headlines, but it is key for a regional market like the Midlands to note that overall volumes and values are up in 2010 and 75 per cent of all UK deals are sub £100 million.”
Mr Griesbach said he expected 2011 would not see any dramatic change in the Midland deal market: “I think it will be pretty steady on this year as people are still getting to grips with the impact of the spending review. That has yet to filter through.
“There’s increasing chatter about interest rates having to go up next year and the key is what impact it’s going to have on consumer spending and industry’s ability to keep investing.”